What do you do with your old retirement plan when you change jobs? First and foremost, don’t take a lump-sum distribution from your old employer’s retirement plan. It generally will be taxable and, if you’re under age 59½, subject to a 10% early-withdrawal penalty.
3 Alternatives to Cashing Out Your Old Retirement Plan:
1. Stay Put: Leave Your Old Retirement Plan in Place
You may be able to leave your money in your old plan. But if you’ll be participating in your new employer’s plan or you already have an IRA, keeping track of multiple plans can make managing your retirement assets more difficult. Also consider how well the old plan’s investment options meet your needs.
2. Roll Over to Your New Employer’s Plan
This may be beneficial if it leaves you with only one retirement plan to keep track of. But evaluate the new plan’s investment options.
3. Roll Your Old Retirement Plan Over to an IRA.
If you participate in a new employer’s plan, this will require keeping track of two plans. But it may be the best alternative because IRAs offer nearly unlimited investment choices. There are additional issues to consider when deciding what to do with your old retirement plan.
Our C&P Wealth Management Team can help you make an informed decision and avoid potential tax traps. Contact James Komos, CPA, CFP™, MAcc at 216-831-7171, email@example.com, or submit an inquiry on the contact us page of our website for more information.
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Why you need to know the value of your assets.
With the gift and estate tax exemptions currently at $5.34 million, you might think that estate valuations are less important. But even if you believe that your estate’s value is under the exemption amount, it’s still important to know the value of your assets.
First, your estate might be worth more than you think. For example, if you own an insurance policy on your life, the death benefit will be included in your estate, that may be enough to trigger estate tax liability.
Second, obtaining a qualified appraisal can limit the IRS’s ability to revalue your assets. If you make gifts that exceed the $14,000 annual gift tax exclusion, you’ll need to file a gift tax return, even if the gift is within your lifetime exemption. Generally, the IRS has three years to audit gift tax returns and challenge reported values for gifted assets. But that period doesn’t begin until the gift has been “adequately disclosed.”
For assets that are difficult to value — such as closely-held business interests or real estate, the best way to satisfy the adequate-disclosure requirements and avoid an IRS challenge is to include a qualified professional appraisal with your return. And it’s not as complicated as you think. Charles Ciuni, Chairman, is a Certified Valuation Analyst, and is available to answer your questions and assist you with a professional appraisal.
Please contact Charles Ciuni at 216.831.7171 or firstname.lastname@example.org for more information on properly valuing your assets. The professionals at Ciuni & Panichi can help you comply with IRS requirements and keep your taxes to a minimum.
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More Tax Breaks for Your Family
At Ciuni & Panichi, Inc., we are experts at finding all the credits you and your family deserve.
Tax credits can be especially valuable because they reduce taxes dollar-for-dollar, where deductions reduce only the amount of income that’s taxed.
Here are two credits available for higher education expenses:
- The American Opportunity credit – up to $2,500 (per year, per student) for qualifying expenses for the first four years of postsecondary education.
- The Lifetime Learning credit – up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.
Be careful because income-based phase-outs apply to these credits. If your income is too high to qualify, you still might be eligible to deduct up to $4,000 of qualified higher education tuition and fees. The deduction is limited to $2,000 for taxpayers with incomes exceeding certain limits and is unavailable to taxpayers with higher incomes.
If you don’t qualify for tax breaks for your child’s higher education expenses because your income is too high, your child might. Many rules and limits apply to the credits and deduction, however.
Call or email Jim Komos at 216.831.7171 or email@example.com and he can help you learn which tax breaks your family might be eligible for on your tax returns and which will provide you the greatest tax savings.
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